It is rare that any single event impacts virtually every business owner worldwide, but as COVID-19 continues its rapid spread, small businesses and entrepreneurs are scrambling to make ends meet. To help business owners everywhere captain their ships through these turbulent waters, we’re asking the experts from our business.com community to answer the most pressing questions about how to keep your business afloat through this public health and economic disruption.
Slower sales has made cash flow a significant problem for thousands of businesses. Meeting regular expenses, such as lease or mortgage payments, and servicing debts can become a challenge. Business.com finance experts answered a list of your questions about how entrepreneurs should address financial considerations during the coronavirus outbreak.
Q: How can small business owners defer loan and/or lease payments during the coronavirus crisis?
A: “Leverage accounts payable and catch up on any owed funds immediately, if possible. Reach out to local banking partners to inquire about current programs they offer due to the change in the economic landscape. Oftentimes, small banks that you have established relationships with will be the most willing to work with you in trying times. If you are looking to defer loan and/or lease payments, the simplest and most important thing for you to do is simply reach out to your lenders and/or landlords and try to renegotiate a temporary repayment plan.” – Adem Selita, CEO ofand .
A: “Honestly, the best course of action, if you know you’re going to be late with a lease payment, is to have the conversation now with the landlord. Explain what’s going on and ask to make smaller payments. Some will be able to be more flexible than others, but it’s unlikely they will be able to easily rent that space, so there’s a good chance they will work with you to avoid having it sit empty. As for loan repayments, if you know now that you’re not going to be able to make a payment, give the lender a call to talk about a plan of action and possible refinancing options to cut the payment.” – Gerri Detweiler, education director atand .
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Q: What are ways small business owners can be proactive with the banks and vendors they owe money? How can entrepreneurs get some immediate financial breathing room?
A: “One thing about the effects of COVID-19 is that it’s both industry and geographically agnostic. If it is affecting you, it’s most likely affecting your bank, your vendors and your competitors. The best advice I can give here is to keep being proactive. While conversations about deferring payment [or] stretching terms … [are] not easy, [they’re] respected and valued. Although you might not always get the answer you want, you have to be proactive. COVID-19 is impacting the entire supply chain, so expect when you approach these conversations, you’re not alone.” – Matthew Gillman, CEO ofand .
A: “Consider asking your vendors to increase the time on your payment terms. If you don’t have terms at all, start by asking for 30 net. If you have that, ask for 60 days. Try to make minimum payments if at all possible. While it’s never ideal to carry balances, at times like these, the goal is to preserve as much cash flow as possible. Apply for an economic impact disaster loan. Newly eligible states are being added. Even these loans take time, though, so do so as quickly as possible.” – Gerri Detweiler, education director atand .
Q: Where should businesses look for short-term funding?
A: “To start, short-term financing should always be aligned to short-term needs. If not properly aligned, then short-term financing can have long-term implications. If you’re a small business that’s in need of short-term financing, the first thing I would do is think about why. Before you take on any company debt, you should look to see if you can solve the cash flow problem without taking on a liability. In the event you need to look for short-term financing, there are many places you can go. If the need is immediate, then small businesses will have to look toward alternative lenders or credit card companies. Alternative lenders or platforms that offer short-term financing have the ability to provide financing within 48 hours.” – Matthew Gillman, CEO ofand .
A: “Any business looking for short-term funding options should apply for SBA economic injury disaster loans ASAP. Many of the cons associated with these relief loans have diminished (qualification appears to have become more lax,) and the interest rate on many of these options have become extremely favorable. However, do not overleverage just because the funding is available.” – Adem Selita, CEO ofand .
A: “During times of crisis, many business owners do turn to high-interest types of business financing to stay afloat, as they are often between a rock and hard place and looking for any type of help available. The problem is that many of the businesses that will go to apply for a cash advance will see that they are required to provide recent sales reports. Due to the immediate lost revenue that they have incurred, many business owners may not even qualify for those higher-interest financing options either. In fact, during times like this, any type of financing may be hard to get, including SBA-guaranteed loans. However, economic injury disaster loans may be available to businesses directly from the SBA.” – Gerri Detweiler, education director atand .
Q: What advice do you have to small business owners who have had to close their businesses due to COVID-19?
A: “I am a small business owner myself that is – and will be – affected by COVID-19. My advice to others is that COVID-19 is serious, it will be impactful, but it will also pass. Reactive decisions and ones without thought can put a business in a worse position when things recover.” – Matthew Gillman, CEO ofand .
A: “Business that have had to scale back operations can bolster cash flow by limiting unnecessary and needless spending wherever possible. Look into leasing equipment to keep operating expenses low. If absolutely necessary, let go of underperforming employees and use economies of scale to redesignate responsibilities among your workforce. If possible, focus on the front end of your business and try to create shorter sales cycles to provide your business with a cash flow cushion.” – Adem Selita, CEO ofand .
Q: How can small business owners position themselves for a successful long-term recovery?
A: “COVID-19 is having and will continue to have widespread impact. With that being said, this is a unique situation where everyone in the supply chain is encountering similar challenges. Companies are being impacted on the front lines with sales, internally with operations and financially with cash flow. The best thing for all small businesses to do is be proactive and transparent with vendors, employees, and lenders. Keeping strong relationships through tough times is only going to help in the future. If financing is being considered, then it’s paramount that small businesses consult with their accountant or a finance expert to understand both the short- and long-term implications of the financing being considered. Ask questions to friends, family and other local business owners. Find out what people are doing, who they work with, and any tips and tricks that can help you get back to the status quo.” – Matthew Gillman, CEO ofand .
A: “The natural desire to avoid pain at all costs is the No. 1 reason otherwise intelligent investors lose money. We see a dip (and sometimes a very big dip, like now) and suddenly, all our knowledge about market cycles and historical patterns flies out the window because we don’t want to lose money! Keeping your long-term goals in mind … is crucial both financially and psychologically. It can be really easy to get bogged down by this crazy ‘new normal’ and throw all your plans and aspirations out the window because it all suddenly feels impossible. The reality is that while there will be suffering and inconvenience and revenue dips, our nation and our economy are resilient.” – Dawn Dahlby, president atand .
A: “Businesses should approach financial planning much more conservatively and make sure they are generating significant cash flows to allow for sustained business operations down the line. Put all future projects on hold until market certainty becomes more apparent and reorganize capital funds to focus on immediate needs so that you can stay afloat in the short term. When a recovery begins, you will be better prepared for it, and you can then revisit future projects from the context of the shifted economic climate.” – Adem Selita, CEO ofand .
Adaptability and resilience are key in times of crisis
For many small businesses, the COVID-19 outbreak has been a shock to the system. Rapid transitions to remote work arrangements, temporary closures and service limitations are never easy, but adaptability in the name of protecting public health has been an essential skill. Setting your business up for resilience during this time is critical. At business.com, we will continue keeping you apprised of expert insights as to how to successfully manage your business in this time, as well as answers to your most pressing questions.
You can visit the business.com community as well, where more than 200,000 entrepreneurs who are also experiencing the coronavirus crisis can come together for mutual support and guidance. We wish you the best of luck in navigating the challenges and risks associated with the spread of COVID-19 and pledge to be your partner as the world braces itself for an eventual return to normalcy.